Maryland Racing Commission rejects horse-racing proposal

Hanah Cho, The Baltimore Sun

The future of live thoroughbred racing in Maryland — along with the Preakness Stakes —is in jeopardy once again after a state commission on Tuesday rejected a proposed racing schedule contingent on several conditions that horse owners and breeders refused to accept.

That means the Laurel Park racetrack could close its doors Jan. 1 unless a last-minute deal is reached between the horsemen and owners of the Maryland Jockey Club, which operates the tracks. Pimlico Race Course doesn't traditionally run races until the spring, when it puts on the Preakness, the second leg of racing Triple's Crown and the state's largest single sporting event.

But prospects for accord appeared dim after a three-hour meeting that featured testy exchanges. Top executives from the corporate parents of the Jockey Club attended, along with hundreds of horse owners, breeders, trainers and racetrack employees. Maryland Racing Commission members chastised the executives and questioned their commitment to racing here.

"You have antagonized everyone in the state, and you are continuing in your arrogant ways," commissioner John McDaniel told executives with casino operator Penn National Gaming, a minority owner of the Jockey Club.

Racing magnate Frank Stronach, chairman and chief executive of MI Developments, pleaded with the horsemen to agree to the conditions, which included giving up some revenue, and urged the commission to support the track owners' proposal. MI Developments, a Canadian real estate company, is the majority owner of the Jockey Club.

"We alone cannot fix it. We have to fix it together," Stronach said. "The model is broken, not just in Maryland but across America."

MI Developments and Penn National and horse-racing industry representatives were unable to agree on a schedule that would ensure that the Jockey Club would at least break even after years of losses and maintain year-round racing for the thousands of workers in the industry.

Though some commissioners expressed hope that the track owners would come back with another proposal, Penn National spokesman Eric Schippers noted that their latest proposal was "summarily rejected by both the horse industry and the commission." The commission's opposition was unanimous.

"It makes it very difficult to understand where we go from here, given the summary rejection of what we thought was a fair, equitable proposal," Schippers said.

Despite weeks of nonstop talks — some brokered by Gov. Martin O'Malley — the two sides remained far apart when the meeting began Tuesday. Soon after it ended, O'Malley issued a statement expressing disappointment that the parties couldn't reach a deal.

"I would encourage the track owners, industry representatives, and horsemen and breeders to return to the table and reach an agreement that protects the jobs that depend on our rich history of racing in Maryland," O'Malley said in the statement. "We will continue to explore the legal options available to us."

The governor indicated that this office is "prepared to aggressively protect the state's interests, as we did two years ago when presented with the threat of losing Maryland's treasured Preakness Stakes."

That's when the General Assembly passed a law granting the state authority to seize the Preakness, which contributes an estimated $40 million to the economy, as well as Laurel Park and Pimlico in the wake of the bankruptcy of Magna Entertainment Corp., which then owned the Jockey Club.

MI Developments and Penn National offered to maintain 146 days of live racing next year — the same number as this year — but their proposal came with major caveats.

Among the conditions: that the horse owners, trainers and breeders contribute $1.7 million in operating expenses for the tracks, give up their rights to broadcast race signals, support the closing of a training center in Bowie and lobby to increase the price that consumers pay to bet on races. The latter two require legislative changes.

While the horsemen and breeders agreed to make the $1.7 million payment, contingent on running a 146-day schedule, they fiercely opposed relinquishing their simulcast rights and raising betting prices. And the group said they would support closing Bowie only if the Jockey Club replaced the training center's 650 stalls at Laurel Park and Pimlico.

The Maryland Thoroughbred Horsemen's Association and the Maryland Horse Breeders Association also strongly criticized a provision that would allow the Jockey Club to end live racing before the end of 2011 if the operations continued to lose money — even with the horsemen's financial help and if legislative changes are successful.

The commission's decision puts the state's racing industry — which has seen purses and wagering decline over the years amid growing competition from casinos in neighboring states — closer to a demise than ever before.

"If that means there is no racing on Jan. 1 … we are sincerely sorry, but it's not a mess of our making," Foreman told the commissioners.

Several members of the racing commission called for new ownership of the two tracks, though they didn't call on the governor outright to pursue eminent domain.

"All of us suffered long enough with the mismanagement," member David Hayden said. "For the long-term betterment of racing, we need new ownership."

Other racing boosters, including many horsemen and breeders, did urge the state to pursue eminent domain.

"I was never a fan of eminent domain until recently," said Richard Hoffberger, president of the horsemen's association. "I agree this has gotten to the point where we could move forward."

But Schippers of Penn National warned that eminent domain would entail a lengthy legal process — and this at a time when the state is financially struggling.

Officials with MI Developments and Penn National say the tracks can't continue losing money. Laurel Park, for instance, has been losing $4 million to $7 million annually, while Pimlico's profit comes almost entirely from the Preakness.

Stronach's impassioned speech, however, didn't appear to win over the commissioners, who asked for more details on the Jockey Club's proposed schedule. Stronach did not respond directly to some of their questions. Instead, he reiterated that he's committed to racing in Maryland and wants to work together to devise a long-term solution.

At one point, commission Chairman Louis Ulman asked why Stronach did not pay the application fee for a slot-machine license in Anne Arundel County, which eventually went to the proposed parlor at Arundel Mills, 10 miles from Laurel Park. Failure to pay the license deposit disqualified the track owners.

"We were one day late on the deposit. There were circumstances," said Stronach, who left the meeting early.

Voters in Anne Arundel County approved a ballot measure in November allowing the mall casino proposed by the Cordish Cos. to move forward, ending chances of slots at Laurel Park, which industry observers said would have shored up its finances.

Penn National said recently that it would lobby for a second license in the county when the General Assembly reconvenes next month, a process that would require a change to the state Constitution.

The commission also criticized Penn National, whose chief executive, Peter M. Carlino, attended the meeting to rebut sentiments among Maryland horsemen and breeders that the casino operator is trying to kill racing in Maryland to prop up its racetrack and casino at Charles Town, W.Va.

This is the second time the commission rejected a proposed schedule from the track owners. Last month, the panel denied the Jockey Club's proposal to run 47 live racing days at Laurel Park and Pimlico.

With no schedule to operate live racing, the Jockey Club could start laying off hundreds of workers, said Schippers of Penn National.

That would be devastating for the employees who work and live at Laurel Park and Pimilco, industry representatives said.

"We are all in a very complicated situation," said Bobby Lillis, benefits coordinator for the Maryland Horsemen's Assistance Fund, which provides financial help for low-income racetrack workers. "If the tracks do close down, you got farmers that are not going to sell their goods to Maryland horsemen, horsemen leaving to go to West Virginia, Delaware and Pennsylvania, and you got people who live here with nowhere to go."